Tag Archives: gas

Kazakhstan’s KMG EP revenues drop

APRIL 28 2016 (The Conway Bulletin) – Kazakhstan’s state-owned energy company KMG EP said its revenues for Q1 2016 were nearly 50% lower in US dollar terms than in Q1 2015, highlighting the impact of the depreciation of the tenge on Kazakh businesses. KMG EP data is a good indicator of the overall health of Kazakhstan’s state owned energy company Kazmunaigas, a main driver of the Kazakh economy.

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(News report from Issue No. 278, published on April 29 2016)

Kazakhstan’s Kazmunaigas denies KMG EP’s buyout

APRIL 21 2016 (The Conway Bulletin) – Kazakhstan’s state-owned oil and gas company Kazmunaigas denied it had plans to issue new debt to raise cash to finance the buyout of minority shareholders in KMG EP, its subsidiary whose GDRs are listed in London. Ardak Kassymbek, one of Kazmunaigas’ managing directors, had earlier told Reuters that the company could borrow about $1b for the buyout.

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(News report from Issue No. 278, published on April 29 2016)

Kyrgyzstan warns Gazprom

APRIL 15 2016 (The Conway Bulletin) – Kyrgyzstan’s anti-monopoly agency said it will monitor possible unjustified price increases by Gazprom Neft Asia for its petrol. The subsidiary of Russian energy giant Gazprom owns and operates filling stations throughout the country. Reports had shown possible price increases of 7-10% for Gazprom’s petrol from April 1.

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(News report from Issue No. 277, published on April 22 2016)

Turkmen ministry plans to boost CNG

APRIL 19 2016 (The Conway Bulletin) – The Turkmen energy ministry said it plans to produce 450,000 tonnes of compressed natural gas (CNG) this year, betting on the high demand for fuel in neighbouring countries. The Turkmen government doesn’t generally publish data on its CNG production, but the tone of the release showed that this might be an increase compared to last year.

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(News report from Issue No. 277, published on April 22 2016)

Turkmenistan increases gas to China

APRIL 19 2016 (The Conway Bulletin) – Turkmenistan increased gas shipments to China by a third in Q1 2016, Chinese state media reported. According to Xinhua news agency, Turkmenistan exported 10.6b cubic metres of gas between Jan and March 2016 via the Central Asia-China pipeline, which runs through Uzbekistan and Kazakhstan. The total annual capacity of the pipeline is 55b cubic metres.

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(News report from Issue No. 277, published on April 22 2016)

Kazakh oil service firms criticise subsoil law changes

APRIL 21 2016, ALMATY (The Conway Bulletin) – Kazakh oil service companies have said they are concerned about changes in the country’s subsoil law that the government needs to make to comply with WTO and Eurasian Economic Union regulations.

Nurlan Zhumagulov, head of the Union of oil service companies, said the proposed new law could harm local businesses.

“The new code will cut support for domestic producers. It will cancel the conditional inclusion in bids of local goods, workers and services in subsoil contracts,” Mr Zhumagulov told local media.

Local content, an industry code- word for the use of domestic assets and human resources, has been a cornerstone of Kazakhstan’s oil industry. Over the past two decades, with a series of laws, the government had raised the proportion of local workers and service contracts awarded to Kazakh companies in the oil sector.

Now, WTO regulations and the prospect of similar rules in the Eurasian Economic Union might stop subsidies and favouritism, a move cheered by international firms looking to win business in Kazakhstan. They have said that the changes to the subsoil law will make the tender process fairer.

Having negotiated since the mid- 1990s, Kazakhstan finally joined the WTO in November 2015. It requires Kazakhstan to scrap its local content legislation and stop favouring its local companies.

This comes at a tough time for the oil industry. The sharp fall in oil prices, which averaged $51/barrel in 2015, meant that service industry’s revenues fell by 25% last year, accord- ing to Mr Zhumagulov.

But the Asset Issekeshev, minister of industry, appeared to brush aside these concerns

“We are aware of all these questions and they will be resolved in the framework of the new code,” he said.

Spurred on partially by an economic downturn that has hit government revenues, Kazakhstan wants to attract more foreign investment into its extractive sectors.

It has identified its current subsoil laws as a potential weakness and a barrier to entry.

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(News report from Issue No. 277, published on April 22 2016)

Business comment: Dividends Et Impera

APRIL 15 2016 (The Conway Bulletin) – Dividends make investors happy, when they are issued, that is.

Kazakhstan’s largest publicly-traded companies have embarked on different dividend policies to weather an economic downturn that has, frankly, clobbered markets.

This week, mobile operator Kcell, which is part-owned by Sweden’s TeliaSonera and whose GDRs are listed in London, decided to give out 50% of its profits as dividend to its shareholders.

And, sticking to a long-held company policy, London-listed Central Asia Metals said it would pay out a total dividend of 12.5p.

At the opposite end of the dividend strategy spectrum, KMG EP and Halyk Bank, whose GDRs are also listed in London, ditched their annual payout to shareholders.

Both companies had traditionally given a piece of their profits to shareholders in the past.

KMG EP, a subsidiary of state-owned Kazmunaigas, said a collapse in oil prices over the past couple of years meant it couldn’t afford to pay out dividends and in a terse statement, Halyk Bank, owned by Timur Kulibayev and his wife Dinara Kulibayeva, daughter of President Nursultan Nazarbayev, said it too wouldn’t give shareholders a handout this year.

Halyk Bank didn’t explain its decision but Kazakhstan’s banking sector is bracing itself for an increase in non-performing loans linked to a 50% fall in the value of the tenge last year Broadly, these two different strategies provide an insight into Kazakh corporate mindset. Those companies with a stronger link to the Kazakh government and the political elite simply don’t need to pay dividends to keep their key investors happy.

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(News report from Issue No. 276, published on April 15 2016)

ADB says that Turkmenistan’s TAPI pipeline is ‘doable’

APRIL 8 2016 (The Conway Bulletin) – The Asian Development Bank (ADB) said it will support infrastructure projects in Turkmenistan, including the $10b TAPI gas pipeline and also rail and electricity links to neighbouring countries.

Over the next two years, the ADB plans to invest around $1b on construction of railway corridors and the production and supply of electricity.

On TAPI, the pipeline that should, if all goes to plan, pump Turkmen gas to India through Afghanistan and Pakistan by 2019, the ADB delivered a determined, positive endorsement.

“We’re going through some of the toughest territory in Afghanistan, so the challenge is there. There’s no doubt about it,” Sean O’Sullivan, director for Central Asia at the ADB, told Reuters the day after a $200m investment deal was signed for TAPI between its key shareholders — Turkmenistan, Afghanistan, Pakistan and India.

“But I am sure it’s doable.”

The ADB has been a staunch defender of the TAPI pipeline, which many analysts have said is too complicated to pull off successfully, and advised the partners on the financing of the $10b project.

Previously, the ADB pulled funding from the Turkmenistan-Afghanistan-Tajikistan railway link, because of security concerns. Now, by saying that TAPI is “doable”, Mr O’Sullivan is effectively giving the ADB’s endorsement to the project, despite ongoing doubts on security guarantees.

In the meantime, construction work continued on TAPI, with Turkmen officials triumphantly announced that they had finished welding the first kilometre of the pipeline.

The other countries have reportedly started construction work too.

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(News report from Issue No. 276, published on April 15 2016)

Georgia charges transit fee

APRIL 8 2016 (The Conway Bulletin) – After months of negotiations, Georgia and Russia’s Gazprom retained a deal that will give Georgia 10% of Gazprom’s gas throughput to Armenia. The deal was heralded by the Georgian side as a victory. They said that Gazprom had wanted Georgia to charge it a transit fee for hosting a pipeline to Armenia and then pay for its own gas.

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(News report from Issue No. 276, published on April 15 2016)

Armenia receives gas discount

APRIL 8 2016 (The Conway Bulletin) – A week after agreeing to a price cut for its gas exports to Kyrgyzstan, Russian state-owned Gazprom said it would give Armenia a similar discount for this year’s supplies.

Gazprom’s CEO Alexei Miller and Anatoly Yanovsky, Armenia’s deputy energy minister, signed the agreement after Russian PM Dmitri Medvedev visited Yerevan and discussed the price cut with President Serzh Sargsyan.

Gazprom agreed to give a 9% discount for the gas it pumps to Armenia, the same percentage discount as Kyrgyzstan, lowering the price to $150 per 1,000 cubic metres.

The long-awaited discount, importantly, fell short of Armenian officials’ expectations, having seen Gazprom’s prices to Europe fall by an average of 40% in the past 18 months.

“Any decline in prices is positive, but in this case, a $15 drop cannot be considered a serious help to reducing the prime cost of Armenian goods,” Artsvik Minasyan, minister of economy, said.

Armenian officials had said they hoped to get a 12% discount.

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(News report from Issue No. 276, published on April 15 2016)